Arranging SMSF Finance
NRAS Investment Opportunity
Perth Property: Most Affordable in More than Two Decades
Property predictions for 2021
QBE Housing Outlook of the Australian Property Market for 2018-2021
Investment Property Market Snapshot
Beat the interest rate hikes and switch to a low rate home loan
Economic lift for last-placed WA as indicators point to recovery
Boomtown’s bounce is back as economy out of the woods
National Housing Market Update | July 2018 source: CoreLogic
WA property market tipped to lead the way in growth after slump to worst performing
Perth Rental Landlord Stung With GST Twice By Real Estate Agents
West Mundijong to become new 'industrial hub'
Homebuyers warned of looming mortgage rate rise risk
WA landlords still facing huge damage bills from cannabis grow-houses
New TAX rules for property buyers
Margin Scheme Explained
Capital City Dwelling Values Record Their First Annual Decline Since November 2012 While Regional Dwelling Values Continue To Edge Higher
Perth remains the cheapest capital in Australia to rent a home despite first price rise for five years
Property Resales Continue To Show Profit Despite Slower Conditions
Does your Property Manager stack up?
Investor Lending … Finally Some Good News
Moroccan Chicken Tajine Recipe
Perth Property shows a modest and stable outlook in 2018
7 Tips to Help you Achieve your Financial Goals in 2018
My thoughts about Bitcoin and USI Tech.
December 2017 Housing Market Update - Positive News for Perth
Now’s the time to buy a house in WA: Billionaire Kerry Stokes stakes reputation on perfect property market conditions
Do You & Your Partner Have Life Insurance?
Interest Rate Game Changer
Be on high alert - Scammers target WA property industry
In need of financial solutions? Meet Nash Finance
Summer Nectarine Smoothie
Date and Tahini Fudge recipe
Implications for the housing market and housing affordability from the 2017 Federal Budget
Act now to fix your mortgage rate in the wake of the new 'Bank Tax'?
House Price Hope
Vegan Creamy Sweet Potato Curry
Federal Budget "Property Facts" You May Not Have Heard About
Banks Post Record Profits at Your Expense
CoreLogic Housing Market and Economic Update April - May 2017
Supercharge your day! Healthy Tea Smoothie w/ Kale and Mango
4 Parkside Properties in Perth, WA $164,000 Under The Asking & Valuation Price
Healthy Chocolate Treats
Where’s the Perth Property Market Heading in 2017?
Worried about Job Security & Finances?
What Does It Take To Be Elite At Something?
March 2017 Housing Market Update
Paul Magiatis – A Man Who Has Owned 79 Properties
Kalgoorlie Investment Properties
Financial New Year Resolutions to Keep For 2017
January 2017 Mapping the Market Report
Retirement Poll Results
CASH POSITIVE DUAL-KEY HOUSE & LAND PACKAGES
A Great Time For Potential Buyers In Perth
October 2016 Mapping the Market Report
The number of Aussie's who own 6 or more rental properties ...
Who are SECFI?

Loans used to buy property within an SMSF differ markedly from mainstream mortgage products.  

 

SMSF loans have to fulfil strict ‘limited recourse’ criteria. Limited Recourse Borrowing Arrangements (LRBAs) typically stipulate that the recourse of the lender will be limited to the fund asset that is being financed (including rights to income generated by the asset). The fact that this type of arrangement has to be in place has two important implications.

 

a)  It increases the amount of paperwork required to set up a loan 

b)  It means that banks or other lenders will be more stringent in following due diligence procedures in order to minimize their exposure to excessive risk  


These two factors mean that typical SMSF loan products are different and more difficult to set up compared to standard borrowing arrangements. Being prepared for this fact by carefully studying lender requirements and ensuring that all necessary documents are provided at the correct stages will facilitate the process of obtaining funding. It will also ensure that all loans comply with superannuation legislation.  

 

What do lenders look for when lending to an SMSF? 

 

These two factors mean that typical SMSF loan products are different and more difficult to set up compared to standard borrowing arrangements. Being prepared for this fact by carefully studying lender requirements and ensuring that all necessary documents are provided at the correct stages will facilitate the process of obtaining funding. It will also ensure that all loans comply with superannuation legislation.  

 

What do lenders look for when lending to an SMSF? 

 

•  Property purchases and the structure of the SMSF must comply with the superannuation laws and ASIC rules (if a corporate trustee). 
•  Some lenders will only provide finance to SMSFs that have a corporate trustee.  
•  Loans for construction, refurbishment or vacant land are typically not available.  
•  Most lenders require a loan to value ratio of up to 70%.  
•  The consistency and frequency of contributions to the fund in order to assist with meeting repayment obligations. 
•  The expected rental income from the property. 

•  Many lenders will require specific powers in the SMSF trust deed and you will therefore need to amend the Deed to be in line with the requirement of the specific lender.  

•  Some lenders will require clear written evidence that outside financial advice was sought before they will begin to process the loan application. 
•  Lenders will require evidence of existing insurance or may even require funds to take out specific policies aimed at the SMSFs holding property.  

 

Most lenders require a personal guarantee from the fund member(s) which means the lender has a right to call on the personal guarantor for any shortfall after disposal of the original asset acquired by the SMSF. 

 

Once the finance is in place the mortgage can be managed more or less in the same way as a ‘normal’ mortgage, dependent upon the loan features offered by the specific lender. 

 

When selecting an SMSF lender you should consider the ability to: 
•  vary the term of the mortgage 

•  set up offset accounts

•  make additional payments

•  pay off the loan at any time. 

 

It should be emphasised once again that there are many variables involved in setting up SMSF loans and it is worth your while to make use of specialist advice before committing to a specific lender.

 

 

 

SECFI

Level 11 Brookfield Place

125 St Georges Terrace

Perth WA 6000

 

Phone: 08 9288 4553

Fax: 08 9288 4400

Email: info@secfi.com.au

Subscribe to our Enews